SocGen Buyers Fuel Most European Block Sales Since 2004

European companies and governments
that are dumping more stock into the market than at any time
since 2004 are finding buyers in managers receiving the most
client cash in 11 years.

Block sales in western Europe reached $31.8 billion in the
three months through September as Groupama SA sold shares in
Societe Generale (GLE) SA and Sweden exited a stake in Nordea Bank (NDA) AB,
data compiled by Bloomberg show. At the same time, investors
poured about $22.2 billion into the region’s stock funds in the
15 weeks through Oct. 9, according to data from research firm
EPFR Global Inc.

The ability of large shareholders to sell stakes they have
held for years is a sign markets are healing after the European
debt crisis, according to Maximilian Anderl at UBS AG. The Stoxx
Europe 600 Index, which sank 21 percent from April 2010 to
September 2011 as Greece, Ireland and Portugal accepted
bailouts, has surged 47 percent since.

“Europe has started to get popular and that is
demonstrated by these sales,” Anderl, who helps oversee $643
billion at UBS Global Asset Management in London, said in an
interview. “The window is opening up for a lot of stakeholders
who have been wanting to sell for the last four years. It
doesn’t mean it’s an end to the rally.”

Draghi Pledge

The Stoxx 600 has climbed 2.6 percent this month as U.S.
lawmakers agreed to lift the nation’s borrowing limit, removing
the risk of default in the world’s largest economy. The gauge
has soared since September 22, 2011, as European Central Bank
President Mario Draghi pledged to defend the single European
currency and the 17-nation euro area emerged from a record-long
recession in the second quarter of 2013. The index advanced 0.8
percent in London today for a seventh day of gains.

The level of block sales by shareholders in western Europe
in the third quarter was the highest for that period in nine
years, data compiled by Bloomberg show. Investors have raised
$95.8 billion selling stakes this year, including additional
offerings of shares by companies, the highest level since $117
billion of stock was sold in the whole of 2008, the data show.

Should the deals keep the pace through the fourth quarter,
2013 would see the largest volume of block trades since
Bloomberg data starts in the 1990s.

Investors have pushed money into European stock funds for
15 straight weeks, the longest period since May 2002, according
to data from EPFR. Money managers have the highest allocations
to euro-region stocks in more than six years, according to a
survey by Bank of America Corp.

‘Build Positions’

“Investors who had written off Europe have started to
build positions, and, I think, so far been happy to buy into the
offerings,” Colin McLean, who helps oversee about $970 million
as managing director at SVM Asset Management Ltd. in Edinburgh,
said in a phone interview.

Sellers of blocks of shares can’t continue pushing equity
into the market without affecting the rally in stocks, according
to George Godber, who helps oversee $3.2 billion at Miton Group
Plc in London.

“When you get to this level in sales, it is not a good
sign for markets,” Godber, whose CF Miton U.K. Value
Opportunities Fund (CFUGAIN) has climbed 14 percent since March, said in a
phone interview on Oct. 11. “It’s indicative we’re closer to
the top than to the bottom. It’s extraordinary how much is going
on in placings, and it does suck up demand.”

Groupama Sales

Groupama, the Paris-based insurer, announced on Aug. 13 the
sale of 1.9 percent in Societe Generale, France’s second-largest
bank, raising 517 million euros ($707 million). Less than a
month later, the insurer earned about 250 million euros placing
shares in Eiffage, the construction company based in Asnieres-sur-Seine, France, whose stock has more than doubled since
December 2011.

Groupama said it sold Societe Generale shares to help match
its assets with “market risk” and offloaded Eiffage stock to
“strengthen its financial leeway and reduce its exposure to
market risks.”

Schaeffler AG, the largest investor in Hanover, Germany-based Continental AG (CON), raised 950 million euros on Sept. 17 by
selling a 4 percent stake in Europe’s second-largest car-parts
maker to reduce debt. Telegraaf Media Groep NV, the publisher of
the largest Dutch newspaper, exited its holding in German
broadcaster ProSiebenSat.1 Media AG on Sept. 6, making proceeds
of about 391 million euros.

Nordea, Lloyds

Governments seeking to cut debt were some of the biggest
sellers of equities in the third quarter. Sweden sold a $3.4
billion stake in Nordea Bank, the Nordic region’s largest
lender, on Sept. 25. The deal came a week after the U.K. sold a
3 billion-pound ($4.8 billion) holding in Lloyds Banking Group
Plc (LLOY), its first disposal since bailing out the lender in 2008.

“The role of the state is to regulate banks, not to own
them,” said Sweden’s Financial Markets Minister Peter Norman.
The U.K. government said it offloaded the Lloyds stock to “get
the best value for the taxpayer, maximize support for the
economy and restore them to private ownership.”

Bankia, a Valencia-based bank that took state aid, did the
third-biggest placing last quarter, when it dumped a 979
million-euro stake in Mapfre (MAP), Spain’s largest insurer. Bankia
said the sale was a step in implementing its parent company’s
strategy for the three years through 2015.

Europe’s biggest banks have more than doubled their
highest-quality capital to $1 trillion since 2007 to meet
tougher rules as regulators aim to prevent a repeat of the
taxpayer-funded bank rescues of 2008.

IPO Jump

The sales of equity blocks are coinciding with a jump in
initial public offerings, where privately-held equity is made
available for purchase by individual investors. The volume of
IPOs in Europe more than doubled to $5.4 billion in the third
quarter as investors lured by cheaper valuations and
strengthening economies put their money to work in the region.

European stock indexes will climb 13 percent by the end of
2014, according to the average forecast in a Bloomberg survey of
eight market strategists. The Stoxx 600 has rallied 13 percent
so far this year and advanced 14 percent in 2012 as the ECB kept
its key interest rate at a record low and the Federal Reserve
maintained its bond-buying program.

For Javier Martinez-Piqueras at UBS AG, such central-bank
stimulus will help ensure demand for equities. Investors
withdrew more than $116 billion from European shares from May
2007 to September 2012 as the region’s debt crisis deepened,
according to EPFR data.

“How much money, in all these years, has gradually gone
out of the equity market, and how much money is still left to go
back?” Martinez-Piqueras, co-head of European Capital Markets
origination at UBS in London, said in a phone interview on Oct.
10. “Central banks’ strategy has created a vast amount of money
that has to be invested somewhere. People are willing to
tolerate a bit more risk.”